Income Tax Exemptions – Guidance on implementing a cycle-to-work schemeWednesday, November 11th, 2009
Section 244 of the Income Tax (Earnings and Pensions) Act 2003 provides exemption from income tax on the provision of a cycle or cyclist’s safety equipment, irrespective of how it is provided, as long as the specified conditions are met. The exemption, which also applies to National Insurance contributions, has prompted the creation of “cycle-to-work” schemes, often as part of salary sacrifice arrangements. Employees sacrifice part of their salary in return for the loan of a cycle, making it possible for such schemes to be self-financing. As with childcare vouchers, employers generally use commercially-available schemes to provide this benefit.
At the end of October, the “Cycle to Work Guarantee” was launched. It is a voluntary (not statutory) initiative of the Department for Transport and it challenges businesses to become cycle-friendly employers by making it easy for staff to cycle to and from work. Rather than simply providing tax-exempt cycles and safety equipment, employers that sign up to the Guarantee commit themselves to promoting cycling to work by creating an appropriate workplace infrastructure, including the provision of secure, safe and accessible parking; good quality changing and locker facilities; cycle repair facilities at or near the work site; and training reward and incentive programmes.
More than 70 public and private sector employers have pledged to implement the guarantee. The Government is promoting the Cycle to Work Guarantee to give employees healthy and “green” incentives to get to and from work. Typically, a third or more of staff of large urban employers live within half an hour bike ride of their place of work, but only about 3 per cent currently cycle to work. In September, the Government announced funding of £14m to improve facilities for cyclists at rail stations. These include “Cycle Hubs” at 10 major rail stations and 10,000 extra cycle parking spaces at rail stations across the country. The new cycle hubs will include extra cycle storage facilities, repair services, hire schemes and improved cycle access to and from the stations.
To coincide with the launch of the Cycle to Work Guarantee, the Department for Transport also published Cycle to Work implementation guidance to explain the tax exemption conditions, how to set up a scheme, factors that must be considered if the scheme is to be used in conjunction with salary sacrifice, and the implications of consumer credit law.
Some of the important points highlighted in the guidance have been incorporated into our Employer FAQ on the tax exemption. The updated FAQ is reproduced in this issue of the newsletter.
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